Dermatology practices look to benchmarking to protect finances as health system evolves

By John Carruthers, assistant editor, December 02, 2013

As the payment landscape changes, dermatologists and practice managers continue to look for ways to protect practice revenue while safeguarding quality. To do so, many have begun to delve deeper into the data generated by the day-to-day practice of medicine — on satisfaction, quality, and cost. By turning to one of a growing number of consultants or simply knowing what to look for in their practice performance data, dermatologists can figure out their practices’ strengths and weaknesses, make the case for their value to payers — and safeguard their future.

Responding to pressures

Once the domain of hospital systems and larger groups, the use of advanced practice data is becoming increasingly popular among small practices and solo dermatologists. The driving reason for this data renaissance is the increased use practice management software systems (PMSS), coupled with steady growth in the adoption of electronic health records (EHR) in dermatology practices, which make collecting, aggregating, and interpreting the data more efficient than ever. The government-driven EHR mandate, coupled with anxiety over both recent changes and the changes forthcoming under the Affordable Care Act (ACA), has made many practices and physicians more interested in using benchmarking tools, according to Michael Sanderson, president of medical analytics company RemitDATA. [pagebreak]

"Why are doctors listening now who five years ago could care less? There are a few factors. One is all the new rules under the ACA and the loss of productivity that implementing many of these changes has caused (for example, installing and meaningfully using an EHR system). Another is the pending fee-for-quality payment methodologies,” Sanderson said. “Another big one is compliance — everyone’s looking at their data. They have RAC contractors and payers trying to catch them making a mistake. It took that for many physicians to realize that they’d been in the dark and it was time to do something about it.”

Scottsdale, Ariz., dermatologist W. Patrick Davey, MD, MBA, said that the mounting pressure of payment system change emphasizes the need to be not only aware but proactive on the bottom line of one’s practice.

"Now we’re all predicting revenues going down, so we’re going to have to find ways to reduce our costs. Using benchmarking gives you a report card as to where you stand and where you can enhance your cost structure,” Dr. Davey said. “As physicians, we’re always taught to do everything for everybody. But if you don’t have a margin, you don’t have a mission. You’re going to have to shut down. We’re going to have to start thinking more and more about how to be more cost effective in doing things, and part of that is identifying where you stand currently.” [pagebreak]

Another factor in increased financial scrutiny among dermatologists, according to Kevin Smith, director of the Allergan Practice Consulting Group, is that the recession caused a dip in practice revenues that has only just begun to subside. During this time, he said, practices began to address their shortcomings and diversify their sources of income.

Revenues, Smith said, are just now getting back to 2007 levels for dermatologists. “At one point during the recession 65 percent of practice revenue among our clients was coming directly from the physician provider. By 2011, that was down to 57 percent, because practices were diversifying. They added retail products, they sought to bring in self-payers and cosmetic patients, and they brought in PAs and NPs.”

Finding meaningful comparisons, addressing weaknesses

During his time as a member of a 10-physician practice in Kentucky, Dr. Davey frequently used to compare notes with a dermatologist colleague of his from Kansas City on practice and payer performance. At the time, it was an attempt to get a sense of his practice’s place in the larger world of dermatology. Today, he said, even small practitioners need to do so much more to get an accurate sense of where they stand, including pulling information from their EHRs and/or getting assistance from companies that provide data and consulting services.

“What everyone needs to do is establish a financial dashboard of metrics they should be looking at to give them insight into where they can improve revenues and increase efficiency,” Dr. Davey said. “You need to invest in the resources to compare yourself to similar practices. When I was in Kentucky, the physicians used to benchmark our coding and performance next to each other’s. Now that I’m in solo practice, I’ve been taking advantage of outside resources to compare.” [pagebreak]

In the present health system, Sanderson said, even the specialty surveys put out by management groups fail to provide the necessary level of data for practitioners to act upon them meaningfully.

“A good denial rate nationally is 12 percent. But that’s worthless information. Take a doctor in Chicago and a doctor in Dallas, for example. The doctors are in completely different locations, so the national number is less relevant than the denial rate for their market and for the basket of codes that they do,” Sanderson said. “Valuable analytics would allow a physician to create a custom benchmark relative to their payer mix in their markets and the procedure mix in their practice.”

Benchmarking can also help dermatologists assess the risk that their practice patterns will trigger an audit or otherwise make them look like an outlier to payers. (See sidebar for the impact this can have in terms of being a participating provider in an insurer’s network.)

“A single doctor in a small practice can access these tools and drill down to see where they rank among dermatologists percentile-wise in their market. That score is marked across payer efficiency, staff efficiency, and provider efficiency,” Sanderson said. “Am I as a dermatologist doing more level 4 E/M codes and thus exposing myself to higher audit risk? We can tell them via simple remittance data.” [pagebreak]

One of the more complex tools to evaluate financial performance is the figure for procedure value per hour — that is, how much value does a certain procedure provide to the practice relative to the time and resources it costs the office? Different practices and practice management organizations use different values to arrive at their conclusions, as it’s a complex system to analyze, according to Smith.

“It can be tough to calculate the procedure value per hour. You could say that the government has done it for you with the resource-based relative value scale. We look at it as the time for a consultation, whether a procedure is involved, the cost involved with the procedures, and the follow-up visits and global periods during follow-up care,” Smith said. “This is where benchmarking is important. Providing good outcomes is the most important aspect of providing care, but if you look at follow-up within a global period, what do your peers do? Can you use a nurse to remove sutures or use your ancillary personnel to the scope of their licensure to free up the physician for seeing more patients and generating revenue?” Letting non-physician clinicians and other ancillary personnel work to the full extent of their licensure, he said, can improve a practice’s financial performance.

It’s important to note, Sanderson said, that a growing number of analytics and consulting companies provide data to physicians via either EHR or PMSS on remittance data from payers. There’s no need to switch one’s practice to a proprietary system or add additional processes (besides actually looking at the data) to make meaningful changes. The data, he said, is already being generated. It just takes an active interest by the physician or practice manager to begin utilizing it. [pagebreak]

“90 percent of our client base is getting the electronic version of the remittance they’re already getting from payers,” he said.

Analytics and ACOs

As the health system looks to trim the cost of treatment per patient, the accountable care organization (ACO) model places a similar onus on providers — from primary care to specialists of all stripes — to participate in the same kind of benchmarking, both financial and outcomes-based. Dermatologists even slightly interested in exploring a future as a member of an ACO should already be benchmarking and analyzing practice patterns and performance data, Sanderson said.

“For a physician to consider an ACO, they have to first figure out where they would rank in their given market. If I’m a single dermatologist in the Dallas-Fort Worth area, for example, and Baylor or Aetna is forming an ACO, before I even consider sitting down at the table, I’d better understand if I am a lesser-producing, less-efficient, or higher-compliance-risk doctor compared to my peers,” Sanderson said. “You need to know your practice and how you compare, because everyone else around that table will have a pretty good idea of what you’re doing. If you walk in blind, you’re toast. On both sides of that table, transparency is key. You go to these meetings, you’ll see nothing but analytics.” [pagebreak]

ACOs, Dr. Davey said, will include standardized financial and performance benchmarking as a matter of course for continued participation. But just getting there involves proving that one is already the type of physician who will benefit the larger affiliation.

“The majority of medical dermatology will be in that ACO model,” he predicted. “So you’re going to have to prove to the ACO that you can do things in a more cost-efficient, effective manner. That you get the correct diagnosis and treatments to begin with is important.”

In addition, one of the more frequent questions from specialists is how they’ll be compensated under an ACO as opposed to the current fee-for-service system. With an accurate financial dashboard and historical data, Sanderson said, one can more or less ascertain the benefit of a given ACO contract quickly.

“The other side of benchmarking, apart from seeing your performance, is predictive modeling. An ACO will come to you and say ‘we’ll pay you X amount to accept risk.’ This allows you to take historical data on a real-time basis and project it onto the new compensation model and current utilization model,” Sanderson said. “Predictive modeling will tell you what you’ll make. Really, a tiger doesn’t change its stripes too much. The past is a good indicator. Benchmarking tells you directly that, based on historical patterns, here’s how this new compensation plan would impact you.” [pagebreak]

While not every dermatologist may plan to join an ACO, Dr. Davey said that as the health system evolves, successful dermatologists will need to keep these figures in mind to assure the continued health of their practices.

“Going forward, not just for the financial health of your practice, but to be sure you’re providing the quality of care you want, you need to benchmark,” he said.

According to medical anaytlics company RemitDATA, 99213, an established patient visit code, is the most-paid and most-denied code in dermatology. Other findings from the company’s data, based on information from more than 100,000 physicians and providers, appears below.

Having data about one’s practice at the ready is a good strategy for finding ways to enhance revenues. In a changing health care environment, according to William Brady, senior manager of practice management resources at the American Academy of Dermatology, it may also give dermatologists an advantage in negotiations with payers that are increasingly data-driven.

“Payers already have a picture of practices based on their own data,” Brady said. “Every time a medical practice submits a claim and it is paid, it creates a data point that informs the practice’s profile in that payer’s database.” A paradigm shift toward using that data to determine which providers to include in networks began when the 2010 Affordable Care Act required Medicare Advantage plans to follow a ranking system that gave plans that met certain value- and quality-based criteria a higher star rating than plans that did not. (Plans that succeeded in meeting the criteria, in addition to a higher star rating, received bonus payments.) As the same insurers roll out plans to offer in the ACA’s health care exchanges, where they will compete based on prices that are transparent to potential customers, they have even more incentive to try to control their costs, Brady said.

The key for dermatology practices, Brady argued, is to turn the threat this poses into an opportunity.

“You can challenge decisions to exclude you from a narrower network of providers,” he said. “If you have and understand your practice data, you can use it to educate a payer — regarding the details of both your specialty in general and your practice in particular. You can use your data to help them understand the reasons underlying your data in their system — demographics, disease severity.”

If a payer that has typically included your practice in its panel excludes it from a narrower network for a Medicare Advantage or exchange-sold plan, he said, “Find out why you’re excluded. You can refute the rationale they offer by providing a more complete and fairer picture of your practice using the data that only you have — data for your entire practice, and detailed information about your patients from that specific payer.” While the data payers have collected is robust enough at this point to offer what may appear to be a complete picture, it still may not reflect the kind of risk-adjustment and consideration of practice demographics that are necessary to really understand the kind of value a practice provides to a payer. Practices that can make that case using their data and demonstrate the value proposition their practice offers will have success in the new environment.

In addition to internal data, some knowledge of the local market in general will prove helpful in dealing with payers, according to Richard Martin, JD, the Academy’s assistant director for regulatory policy.

“Networks for exchange plans are likely to have significantly smaller networks than Medicare Advantage or non-exchange plans,” Martin said. “Accordingly, an emerging issue will be adequacy of networks for patient access.” Successfully fighting to ensure that a network offers adequate options for patients, he said, will be driven by data outside the individual practice regarding the local market, the number of physicians in a payer’s network, and their respective specialties/subspecialties. Dermatologists who understand where their referrals come from and what dermatologic care is being provided to patients by primary care providers will have a leg up in these conversations, he said.

The network-narrowing trend is likely to continue, Brady said, and it is affecting physicians across the board. “This really forces physicians to look at how their cost and quality compare with others, and to consider whether there are ways to optimize their current practice arrangement to reflect this paradigm shift, or if they need to align themselves with organizations that have worked out best practices for achieving efficiency while maintaining quality of care,” he said.

In the meantime, he noted, the Academy continues to communicate with payers who narrow their networks in ways that could be harmful to patients by limiting their access to dermatologists. The Academy has a position statement on opposing financial-based credentialing that addresses many of the issues involved and may help dermatologists assess their own situations; search for credentialing at www.aad.org/Forms/Policies/ps.aspx. - Richard Nelson